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Google to turn UK operator?

December 9, 2008 — Nicola Miller

Ofcom’s auction off of the most desirable band of UHF spectrum is starting to cause a stir. As we switch from analogue to digital, media pundits are speculating as to whether companies like Microsoft and Google will snap up the soon-to-be-free broadcast spectrum. Why? This spectrum has a much longer wavelength which means better penetration of walls meaning excellent coverage as well as high speed wireless.

In the US, Google placed a bid on the spectrum but also lobbied the FCC hard to ensure that the spectrum, once won, would be be left open to any non disruptive device (mobile, PDA, laptop, handheld games devices) and that all devices using the network should be open to third party software. For Verizon, who won the auction in the US, this meant that they couldn’t lock devices into their network or protect them against any third party software, securing Google a medium for its ad revenues.

An article in this weekend’s Observer, Media and Business James Robinson wonders if Google, using the Google phone, could turn operator:

Crucially, the chunk of analogue space being sold is high frequency, meaning a high-quality signal that can reach a wider area easily. The spectrum currently used by mobile phone companies is weaker, meaning more base stations need to be built to ensure customers receive a good service. They are expensive to construct and difficult to roll out, often meeting resistance from planners. The new spectrum in effect provides a ready-made network, requiring few modifications or additional capital expenditure, and that could allow a new entrant to establish a national presence within a few years.

That has prompted interest from some of the world’s most valuable companies, including Google, which is placing huge resources behind its new Google phone. Senior industry sources confirm it is considering a bid. Google’s new handset, which will compete with Apple’s iPhone, will give users access to services such as Google Earth, which could be adapted to provide customers with information on everything from road maps to where to find local shops and restaurants. It would be cheaper to sign a deal with an existing mobile provider, as Apple has done, piggybacking on its network and sharing profits. But buying a licence outright would allow Google to keep all the revenue, give it greater control over marketing, and could even allow it to drop monthly rental charges for the device.

That may not be as risky, or as expensive, as it sounds. Google’s search engine is funded almost entirely by advertising, and applying the same business model to its phone could generate enough revenue to fund this plan. A Google handset with no contract would be hugely popular, placing it in the hands of millions of consumers and creating a valuable new captive audience for advertisers.

Given the current economic climes and the memories of the cost of 3G licences still fresh in telcos minds, next year’s bidding will certainly be interesting. Who will have the cash to place the winning bid?